Granted, if a surviving spouse receives the insurance (as well as if the policy was owned by the beneficiaries), it will also be tax free

Are you saying that life insurance proceeds are tax free only if the policy is owned by the beneficiaries?

I got this from Publication 525:

Life Insurance ProceedsLife insurance proceeds paid to you because ofthe death of the insured person are not taxableunless the policy was turned over to you for aprice. This is true even if the proceeds were paidunder an accident or health insurance policy oran endowment contract.

Sounds to me that if the beneficiary owns the policy then it IS taxable.

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